Huge protest against Reserve Bank of India
Bank unions are protesting against the recent Reserve Bank of India (RBI) decision that is allowed banks to settle loans of willful defaulters under the compromise settlement.
Unions protesting against RBI are believed that RBI's framework for compromise settlements and technical write-offs is detrimental step that may compromise the integrity of the banking system and undermine the efforts to combat willful defaulters effectively.
Side of protesting unions:
- Bank Unions are important stakeholders in the banking industry and they have always worked in direction of strict measures to redress the issue of willful defaulters.
- All India Bank Officers' Confederation (AIBOC) and All India Bank Employees Association (AIBEA) stated that if RBI allows compromise settlement for accounts classified as fraud or willful defaulters, it is an insult to the principles of justice and accountability.
- Even it hurts the honest borrowers who strain to meet their financial obligations.
- Bank Unions are arguing that, the RBI has already cleared that the borrowers who committed frauds/ malfeasance/ willful default will remain ineligible for restructuring in its 'Prudential Framework for Resolution of Stressed Assets' that has been published on June 7, 2019.
Sudden change in previous framework:
- The sudden change in the framework by the central bank to allow compromise settlements to willful defaulters created shock and it will not only extend the erosion of public trust in the banking sector but also weakens the confidence of depositors.
- RBI earlier said through circular on 8th June 2023 that, banks are allowed to compromise settlements or technical write-offs in respect of accounts categorized as willful defaulters or fraud.
- It promotes an environment where individuals and entities with the intention to repay their debts choose to hedges their responsibilities without facing appropriate consequences.
Important point from article: Willful defaults have significant affect on the financial stability of banks and the overall economy.
Question & Answer:
Q1. Why the bank unions are protesting against Reserve Bank of India?
Ans. On RBI's decision of allowing banks to settle loans of willful defaulters under the compromise settlement
Q2. What is the full form of two bank unions AIBOC and AIBEA with more than 4 lakh bank employees?
Ans. AIBOC- All India Bank Officers' Confederation and AIBEA- All India Bank Employees Association
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